New Contractor Client - Massive expenses

[Deleted User]

Hi

I have recently taken on a new client who is a Ltd company contractor working as a HGV driver.

After receiving his income and expenses, I was shocked to find the amount of expenses that he has been trying to claim between leaving his old accountant and joining me.

His expenses are 78% of his earnings and that is before my fees and a salary payment.

After analysis his expenses, I have ruled out 25% of them (such as claiming for personal care repairs etc) and advised him to make reductions on 50% of them as he has been trying to claim £200 a week in subsistence.

I have emailed my findings over to him and he now wants to discuss them on the phone on Monday. I imagine that he is going to want to contest most of them as I don't think he wants to pay tax on his earnings. I am hoping that he is going to agree with my findings but I find myself between a rock and a hard place...

• If I allow him to put them through but make it clear in writing that it is against my advice and then he gets investigated, I am potentially implicated in his tax evasion.
  
• If I tell him that I can't represent him, I lose his fee and I don't have many clients as it is and really need that fee.
  

Just to make it clear that the time difference between him leaving his old accountant and joining me was not due to the old accountant getting rid of him because of this same situation, it was because I poached him from his previous accountant and have been waiting for a handover as they are in the process of completing his year end.

Not sure what to do?

Thanks

Don

MarieNoelle

Re expenses claim: does the client have receipts supporting his claim? Are the expenses wholly, exclusively AND necessarily incurred for the job?
I wouldn't cut them by 50 % to make them look more reasonable. There are either genuine business expenses or they are not. If the company has reimbursed expenses that do not fall into the W, E and N for business then a taxable benefit arises on the client.

You mention salary payment. Is the company PAYE registered and have wages been processed through RTI?

Re ethics: I don't think you have a choice. If you advise him on how to proceed and he ignores your advice you have to disengage. Losing one client is still better than to lose your licence.

[Deleted User]

Not sure about the receipts yet but even if he does have them, it won't prove if they are business transactions or not.

The 50% I mentioned were allowable in nature but I doubt their values so have asked him to re-assess them rather then just reduce them.

As I mentioned, I have analysed them out so have made my own assessment on whether they are allowable or not but it is getting him to agree to that which may be the hard part.

I have previous experience of this client when I worked for a practice a few years ago and then he left to go with another accountant and now he has come direct to me. From past experience, he never claimed expenses like this as we would not allow it and without the handover being completed yet, I don't know what his previous accountant has allowed to go through without the records.

I will just have to tell him that I cannot represent him if he does not agree with my assessment.

[Deleted User]

I wasn't aware of his behaviour prior to poaching him. When I worked with him previously, his claims were in line with what was reasonable and were never an issue. I am just hoping that he previous accountant hasn't encouraged this as they are doing his year end at the moment so I can't make any adjustments.

burg

I can only echo the comments of others.
Go through the expenses deciding what is actually business related and then discuss this with the client and explain your reasoning.
The fee is irrelevant. If the client is claiming expenses that are not genuine business expenses and chooses to not correct this and continue to do so you may need to make an MLR report and potentially cease to act.